TPP – will Vietnam be one of the big winners?
22 April 2016
Although Vietnam is being touted as one of the big winners of the Trans-Pacific Partnership (TPP), two Vietnamese entrepreneurs say the agreement will bring both rewards and challenges to the Southeast Asian country. CEO and founder of textile company GARB Nguyen Thanh Vinh, and U&I Agricultural Corporation (Unifarm) CEO Pham Quoc Liem give their perspectives on how the TPP will affect their respective sectors.
One Vietnamese industry that may benefit significantly from the TPP is the apparel manufacturing sector.
In October 2015, Bloomberg reported Vietnam might be the TPP’s “biggest winner”, and that Vietnam’s gross domestic product (GDP) could jump 11 percent (US$36 billion) in the agreement’s first decade. Exports could jump 28 percent over the same period as “companies move factories” to Vietnam, said the article.
Vietnam, with its low-wage, export-reliant economy would benefit from the estimated 18,000 tariffs that would be removed under the TPP, Bloomberg reported. The agreement would also strengthen trade between Vietnam and the United States, ushering in an era of less reliance by Vietnam on its largest trade partner, China – which is not a part of the TPP.
One Vietnamese industry that may benefit significantly from the TPP is the apparel manufacturing sector.
Nguyen Thanh Vinh is CEO and founder of textile company GARB, which supplies single yarn and woven-fabric products to companies such as Pierre Cardin and Esprit. He founded the company in 2004 after nearly a decade working for multinational textile and garment companies.
Vinh says the agreement would attract more foreign investment to Vietnam, but it would be those foreign investors, not local textile and garment manufacturers, who would benefit the most.
“Vietnamese companies in textile, garment and footwear industries depend a lot on material supply from overseas, particularly from China. Currently we can only [produce] low yarn-count fabrics for middle and low ranges, but we have not been able to produce high-quality and fashionable fabrics yet. If we cannot make the fabric from yarn, then Vietnam would not enjoy the tariff preference.”
Citing predictions by the Eurasia Group, Bloomberg reports Vietnamese apparel and footwear exports could increase by 50 percent in 10 years. Vinh says, however, this benefit would rest largely with the foreign companies that already have the “vertical supply chain from yarn to garment” in place.
“Small Vietnamese companies may not get any benefit as they cannot produce most of the articles from yarn to garments.”
Vinh agrees that trade with the US would increase, but points out China (and Taiwan) is already moving “a lot of factories to Vietnam” to take advantage of the TPP.
Meanwhile, U&I Agricultural Corporation (Unifarm) CEO Pham Quoc Liem says although the trade agreement could help local agricultural producers access overseas markets, overall the agriculture sector “does not benefit much" from the agreement.
“It’s too hard to be successful with [Vietnam’s] weak competitiveness coming from small-scale production and traditional technology. In the opposite direction, the producers from other member counties ... can enter Vietnam’s market with the good quality and competitive prices, that can beat Vietnam’s produce right in its home.”
Unifarm is an agricultural co-operative that supplies fruit and vegetables to supermarkets. It also exports eggplants and other vegetables, such as bananas, to Japan.
While the TPP poses many challenges for Vietnam’s agriculture industry, it also provides great opportunity for the industry to restructure and move forward, Liem says.
“Allowing the people to own big-scale land, investing in agri-tech, connecting farmers to farmers and farmers to scientists ... will help Vietnam’s produce to increase competitiveness in the market, local and overseas.”
Liem says Unifarm has invested in agri-tech in order to grow its produce on a scale that ensures it is competitive in the region. Unifarm’s Japanese trade relationship is already helped by a zero-tariff on bananas, but Liem hopes the TPP will help Unifarm diversify the products it exports to Japan in the future.
He says it is “not good for any country’s trade to rely on only one market”. The TPP would reduce trade reliance on China and give Vietnam the chance to increase trade with countries such as USA, Australia, Japan, and New Zealand.
“Although [New Zealand and Vietnam] already have a free trade agreement, the successful negotiation for the TPP more and more proves their goodwill and trust of each other. More trust means more chance, more understanding and more trade relationships, I believe.”
In the year ending 2015, MFAT ranked Vietnam New Zealand’s 26th largest trade partner, with two-way trade of about NZ$1.23 billion.
Vinh says the TPP would be “good for our two countries” and specifically open the door to New Zealand commodities such as merino wools.
He feels the mood in Vietnam is generally positive towards the TPP.
“The Vietnamese [people] understand that we cannot gain all the benefits for all industries, so many people feel excited with the TPP, in general, more than just specifically anxious about what the agriculture of the country will face.”
This story was first published on the Asia New Zealand Foundation website.
